Shyam Metalics IPO Size Reduced to Rs 909 crore; to hit market on June 14

Among the awaited IPOs to be launched in June 2021 is that of Kolkata-based Shyam Metalics and Energy Ltd (SMEL). The initial public offer (IPO) of the company will open on June 14 at a size of Rs 909 crore. The three-day IPO’s issue closes on June 16. The bidding for anchor investors is set to open on June 11.

The Shyam Metalics IPO consists of fresh issuance of Rs 657 crore-worth equity shares. The offer for sale (OFS) by existing shareholders will be worth Rs 450 crore, according to the company’s draft red herring prospectus (DRHP). The participants of the OFS include Subham Buildwell, Subham Capital, Kalpataru Housefin and Trading, Narantak Dealcomm, Toplight Mercantiles and Dorite Tracon.

The company has reduced its IPO from the earlier Rs 1,107 crore, after promoters showed willingness to let go of only Rs 252 crore from their stakes. The earlier amount of shares to be offloaded was Rs 452 crore. The fresh issue size remains the same, though. A key reason cited by analysts for the reduction of the IPO size is the high valuation of metal stocks in recent times.

As per the draft papers, the company has reserved up to 50 per cent of the offer for qualified institutional buyers, while non-institutional investors will have nearly 15 per cent. Retail buyers will have up to 35 per cent reserved. The offer also includes nearly three lakh equity shares for eligible employees of the company.

According to the DRHP, the company plans to use the proceeds from IPO for repayment of debt to the tune of Rs 470 crore and also debt of its arm Shyam SEL and Power Ltd. It may be recalled that Shyam Metalics and Energy had filed its preliminary papers with market regulator SEBI in February. The company had received the green signal from SEBI on May 11.

Shyam Metalics IPO tentative dates

The company

Shyam Metalics is one of the country’s top integrated metal producing companies apart from being among India’s largest producers of ferro alloy and construction steel. It is also the fourth largest sponge iron producer in India. The steel maker operates three manufacturing units including one in Odisha and two in West Bengal. It sells TMT (thermo mechanically treated) bars and other construction products under the brand name of SEL. As of December 2020, the company’s total installed capacity stood at 5.71 million tonne per annum. Plans to increase capacity to over 11.5 million tonnes by 2025 are in the pipeline.

As of December 2020, the company has a networth of Rss 3,285 crore asd a working capital of Rs 682 crore. For the nine-month period ending December 2020, its revenues were a little over Rs 3,933 crore when compared to a little over Rs 3283 crore a year before. The net income for the same timeframe was over Rs 456 crore as compared to Rs 260 crore from a year before that. The metal maker claims that ever since it started operations in the fiscal year 2005, its EBITDA has been positive in all financial years.

The company had planned an IPO earlier as well and had also received the nod from SEBI to go ahead with the issue back in 2018 but it had deferred such plans. The lead managers to the current issue include ICICI Securities, JM Financial, IIFL Securities, Axis Capital and SBI Capital Markets Ltd.

The sector

According to IBEF, consumption of finished steel in India rose from 8.55 MT in February 2020 to 9.13 MT in February 2021. Between April 2020 and January 2021, India’s production of finished steel was at 76.04 MT while the production of crude steel between April 2020 and February 2021 was at 93.1 MT. India became the second largest producer of steel in 2019.

Conclusion

Shyam Metalics IPO is one of the much-awaited issues in June. It is a Rs 909 crore sized IPO that opens on June 14 and closes on June 16. If you wish to apply for the Shyam Metalics IPO, check out the Angel One website to log in to your account or open a demat and IPO account.